Steve Denning

A critical analysis challenges a Harvard Business Review article's claim that organizational change fails primarily due to a "False Alignment Trap." While internal agreement is important, the critique argues that flawed strategy, weak customer value propositions, and poor market adaptation are more fundamental issues. The HBR article's use of Pandora as a success story is undermined by the company's dismal 10-year shareholder returns, significantly lagging the S&P 500 despite numerous internal "alignment rituals." This exemplifies a broader flaw in management thinking and consulting advice: prioritizing internal process and "transformation theater" over tangible external results and genuine customer value creation. True organizational success requires both alignment and a winning, customer-centric strategy.

This article highlights a fundamental business dichotomy: "Value Creators" versus "Self-Dealers." Henry Ford exemplifies the former, innovating to deliver genuine customer value, democratizing mobility, and generating broad societal benefits alongside wealth. Conversely, advertising pioneer Claude Hopkins represents "Self-Dealers," prioritizing personal and client gain through persuasion without creating new customer value. The piece critiques modern management literature, including a new BCG book, for implicitly endorsing this self-dealing mindset and Maximizing Shareholder Value (MSV) over true customer-centric innovation. It argues that while self-dealing offers fleeting gains, Value Creation is the only sustainable strategy for long-term success and societal well-being, urging businesses and society to embrace the former.

Historically, enduring businesses like Wedgwood, P&G, and Ford consistently built success by prioritizing customer value, trust, and market expansion, recognizing profits as a natural outcome. Management thinkers such as Peter Drucker reinforced this, defining a business's core purpose as creating customers. Yet, the past five decades saw the dominance of 'shareholder value maximization,' an ideology now widely criticized as a short-sighted aberration that fostered short-termism. Modern powerhouses like Amazon and Apple continue to validate the long-term efficacy of deep customer obsession and continuous innovation, proving this enduring approach far more robust than the fleeting MSV doctrine.

Bain consultants are advocating a return to "Managing for Value" (MSV), urging companies to prioritize shareholder returns and treat other stakeholders as mere constraints. This ideology, which gained prominence in the 1970s due to economic crises, Milton Friedman's influence, and agency theory, sidelined Peter Drucker's customer-centric view. Historically, firms fully embracing MSV, like General Electric, often delivered mediocre long-term results and faced decline. In contrast, companies focused on creating customer value, such as Amazon and Apple, achieved sustained success and high valuations. The current revival attempt is driven by higher capital costs and a backlash against ESG frameworks, offering a seemingly simple objective. However, the proven superior performance of customer-centric models strongly challenges MSV's re-emergence, suggesting that genuine value creation, not short-term extraction, drives durable success.

CANNES, FRANCE MAY 14 2010 Michael Douglas attends the "Wall Street: Money Never Sleeps" Press Conference . (Photo by Jean Baptiste Lacroix/WireImage)WireImage

Management experts persistently advocate for hierarchical "alignment," despite compelling evidence that networks of competence consistently outperform traditional structures. Hierarchies, marked by upward reporting and limited horizontal interaction, often stifle innovation and prioritize control for short-term profit. Conversely, networks foster autonomy, horizontal collaboration, and shared purpose, driving sustained value creation. The internet and AI have further empowered networks by reducing coordination costs and enhancing efficiency, making them ideal for today's fast-paced, customer-driven market. While hierarchies retain roles for legal accountability, the dominant organizational logic in the digital era is increasingly shifting towards adaptive, high-performing networks.

In 1911, Frederick Taylor declared that “in the future, the system must come before the man.” For most of the 20th century, management followed that script.

MOUNT PROSPECT, IL - MAY 31: A motorist pumps gasoline into his van at a Costco Wholesale store's gas station (Photo by Tim Boyle/Getty Images)

Costco co-founder Jim Sinegal walks through a Costco store AFP PHOTO / Saul LOEB (Photo credit SAUL LOEB/AFP via Getty Images)

Two meanings of “value” produce two kinds of firms—and only one of them compounds its returns